74,000 Nonfarm Payroll Jobs Added in December

Many people will see that the national unemployment rate dropped 0.3% to 6.7% in December and think that the country posted a strong jobs report.

In fact, nonfarm payroll employment missed by a mile (+74,000 vs estimates of +200,000), and the number of Americans not in the labor force spiked to an all-time high.

It's easy to see what happened in December when you break down the numbers a bit.

To start, the civilian noninstitutional population increased by 178,000 to 246,745,000, while the civilian labor force dropped 347,000 to 154,937,000. The civilian noninstitutional population is those Americans aged 16 years and older who are not inmates of institutions and not currently on active duty in the Armed Forces. The civilian labor force represents the members of the civilian noninstitutional population who are either employed or officially unemployed (actively looking for work).

Divide the civilian labor force by the civilian noninstitutional population and you get a labor force participation rate of just 62.8%, which is a very low number in the modern era. A low number is obviously not a good thing.

In December, the number of employed Americans increased by 143,000 to 144,586,000. The number of unemployed dropped by 490,000 to 10,351,000 - combine the increase in the number of employed Americans with the decrease in the number of unemployed Americans and you get an unemployment rate that dropped by 0.3% in December.

Good, right?

Well, let's look at the "not in labor force" statistic. In the month of December, 525,000 Americans were added to the "not in labor force" field to push the number up to 91,808,000. These are people who are not employed and who are not actively looking for work - this is a staggeringly high number that should worry each and every American.

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In short, this was not a good employment report, and it will be interesting to see how the Fed reacts to it.

Note: nonfarm payroll numbers were revised higher from 203,000 to 241,000 in November.